If your media files compress+encode the audio in AC3/DTS (up to 5.1 channels) already, it is possible to configure media player software to bitstream that audio directly to the receiver and the receiver handle it. Of course Windows default won't do it for you. You need apps like AC3filter and MPC-HC.

The Model M is not for the faint of heart. You either like them or hate them.

I answered a similar question to this in another thread a while back. All motherboard on-board audio will pass 5.1 audio down the optical if the audio source is already pre-encoded into Dolby Digital or DTS (subject to receiver support the other end, and the use of software that supports Dolby / DTS). If you play a stereo audio source on the PC, then you will just get stereo at the other end too. You can either use a speaker fill option on the receiver (my receiver has a Dolby Pro Logic II Music mode for example), or you can use a soundcard that will upmix and encode stereo sources on the fly.

I have only ever used Creative cards for this, and my X-FI Titanium HD does a super job with it. I just set the bitstream out to Dolby Digital Live and flick the option on the control pannel for X-FI CMSS 3D. Job done, as it will detect pre-encoded material and pass that thru automatically, and upmix anything else into Dolby 5.1/7.1.

All X-FI's from the Xtreme Gamer upwards support the Dolby encode, and those cards will run you approx £50. Asus has a competing model - The Xonar DX and will also run you about £50, but I have no experience of using that card (but it gets good reviews like the X-FI).

On a personal note, I can hear the difference on my X-FI if I use optical into my Logitech Z-5500D speakers Vs. using analogue 6 CH direct input. The latter sounds SO much better, so I try to avoid "lossy" compression wherever possible now.

Flying Fox wrote:2-channel over optical is for PCM (uncompressed) format.

If your media files compress+encode the audio in AC3/DTS (up to 5.1 channels) already, it is possible to configure media player software to bitstream that audio directly to the receiver and the receiver handle it. Of course Windows default won't do it for you. You need apps like AC3filter and MPC-HC.

I must get my pedant on, please excuse me. Your explanation was valid enough, and probably addressed the question, but I wanted to clarify and expand a few parts.

2 channel over optical is for 'live' aka uncompressed streams. Some newer devices can output uncompressed multichannel, but the majority do not.

If your media files contain precompressed audio (AC3/DTS/multichannel AAC/etc), those precompressed formats can be transmitted to the receiver/decoder digitally, with the source device (PC) only demuxing the compressed audio out, not performing any decode or processing.

"Bitstreaming" is a somewhat confused term still. Some folks seem content to have it mean "digital, not mangled, output digitally", others further specify that it should be the exact data that was stored on the disc with the video, and some feel it means "output along with untouched video, HDMI-style". I personally like some of the former and some of the latter. I only use "bitstreaming" when referring to HDMI output of unmodified compressed audio. Your choice, though.

If you're setting up a new HTPC or refurbing an older one, just about any audio device that allows digital output should be just fine. Digital is digital, there is no SnR or interference to worry about. I personally dig the Xonar DG right now, it does optical output, is low-profile ready, PCI for max compatibility, and I get them locally just under 30$ US. Hard to beat.

I'd also recommend checking out the LAV filters. They're getting raves from some cinephiles I listen to, since they address some minor bugs in the main DXVA spec, while giving hardware decode of video (No more red bleed from chroma upscale! Yay!). They tend to be very easy to install/config, as well.

Any of the ATI/AMD Radeon HD cards (from 4000 series on I believe) should be able to pass 5.1/7.1 *uncompressed* channels to that receiver. The 5000 series and later should also be able to pass all the fancy Blu-Ray compressed codecs (DTS Master Audio and Dolby Digital TruHD) as well as your standard Dolby Digital and DTS codecs to the receiver as well.